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Crude Ends Lower As China Data Weigh

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Oil futures finished lower Monday, as China's large trade deficit sparked concerns of a slowdown in the world's second-biggest oil consumer, while worries over Greece's sovereign-debt crisis lingered.

Light, sweet crude for April delivery settled $1.06, or 1%, lower at $106.34 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled 64 cents, or 0.5%, lower at $125.34 a barrel.

Futures began the day lower after the Chinese government reported a surprisingly large trade deficit of $31.48 billion in February, on the heels of $27.28 billion surplus in January. The deficit was caused by weakening demand for exports and seasonal distortions. A deficit had been expected, but it was much wider than anticipated.

"The news out of China has reignited worries about the global economy," said Gene McGillian, analyst at Tradition Energy in Stamford, Conn.

China, as the No. 2 oil consumer after the U.S., is a major driver of oil prices, and its furious economic growth has kept prices elevated in recent years even as the U.S. and other developed countries experience a slowdown.

Despite the country's hefty trade deficit, analysts noted the weak number could open the door to offsetting monetary stimulus measures, which are generally bullish for commodity prices.

In addition, prices remained under pressure on concerns that additional sovereign-debt troubles still loom in Europe despite the recent bailout of Greece.

On Friday, ratings firms Fitch and Moody's declared Greece in default. The country's EUR200 billion debt restructuring constituted a so-called credit event, a panel of market participants ruled, triggering insurance-like contracts that pay off creditors that suffer losses.

Oil traders have been following events in Greece for months because of worries that the country's sovereign-debt crisis will spread to other nations in the euro zone or elsewhere, weakening demand for crude oil.

Monday's losses wiped out Friday's rally and reflect the Nymex contract's recent trading pattern of between $105 and $110 a barrel, a range futures have traded in for more than two weeks.

Prices continue to stick to their elevated levels due in large part to worries about escalating tensions between Iran and the West and broader geopolitical concerns. The U.S. and its allies have applied increasingly harsher sanctions on Iran in a bid to curb its nuclear ambitions, but the stand-off has prompted worries of supply disruptions.

Tehran says its nuclear program is for peaceful purposes, but Western countries are concerned the country is developing a nuclear weapon.

The gains, however, come in the face of increasingly weak demand for oil in developed countries. Several analysts have noted that oil futures could sell off sharply if events in Iran resolve peacefully.

"Tepid demand and a rising oil burden lead us to believe that crude fundamentals will be increasingly challenged," Morgan Stanley analysts wrote in a client note.

Front-month April reformulated gasoline blendstock, or RBOB, settled 0.94 cent, or 0.3%, lower at $3.3230 a gallon. April heating oil settled 2.09 cents, 0.6%, lower at $3.2429 a gallon.

Copyright (c) 2012 Dow Jones & Company, Inc.

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